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Singapore – Five International Banks Face Antitrust Lawsuit In The US For Allegedly Manipulating The Gold Benchmark.

20 August, 2014

 

On 3 March 2014, a class action lawsuit filed in a New York District Court was brought against five international banks, Bank of Nova Scotia, Barclays Bank, Deutsche Bank, HSBC, and Société Générale, all members of the London Gold Market Fixing Ltd (“Gold Fix”), for allegedly conspiring with one another to manipulate the prices of gold and gold derivatives contracts.


Gold fixing is a price-setting mechanism which provides market users with the opportunity to buy and sell gold at a single recognised quoted price. Not only does the Gold Fix help set a standard price for settling contracts among members of the London bullion market, it also strongly influences the benchmark for pricing the majority of gold futures and options traded on the Chicago Mercantile Exchange Group (COMEX) contract market. Currently, the price of gold is fixed twice daily. The complainants allege that the banks collusively manipulated the London gold benchmark in order to profit themselves individually and collectively, and are seeking more than USD 5m (SGD 6.27m) in damages. Moreover, the complainants are also alleging that the banks have altered their conduct since reports of the gold price manipulation have surfaced, eg Deutsche Bank publicly announced its withdrawal from the Gold Fix in January 2014, and the members have been investigating changes in the way the Gold Fix operates.


This lawsuit is related to the on-going investigation of the potential manipulation of the precious metals benchmarks by enforcement agencies in Europe. Germany’s financial regulator, BaFin, has been investigating Deutsche Bank for the potential manipulation of gold and silver prices, ie Deutsche Bank has met with and responded to BaFin’s inquiries for documents. Similarly, the Financial Conduct Authority in the UK has been scrutinising the setting of prices in the gold market.


Separately, several of the banks were fined in 2013 by the European Commission for participating in a cartel in the financial derivatives industry relating to the interest rate derivatives denominated in the euro currency and Japanese yen through the manipulation of the London Interbank Offered Rate (LIBOR).


In Singapore


Private actions in relation to competition law infringements arise only where the Competition Commission of Singapore has made an infringement finding in relation to the matter, and after all appeals (and appeal periods) have been exhausted. Class action lawsuits are not possible in Singapore – the only recognised form of group litigation is a representative action.

 

Drew & Napier

 

For further information, please contact:

 

Cavinder Bull, Director, Drew & Napier

cavinder.bull@drewnapier.com

 

Chong Kin Lim, Director, Drew & Napier

chongkin.lim@drewnapier.com

 

Scott Clements, Drew & Napier

scott.clements@drewnapier.com

 

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